Introductions: Donna Miskin, editor in chief, Treasury & Risk magazine.

     Donna Miskin, editor in chief, Treasury & Risk magazine: This year, our Solution of the Year is a new category recognizing systems and solutions developed by vendors in 2009. Joining us to help moderate and present the awards is Judson Murchie of Aite Group.

Judson is an analyst specializing in corporate cash and liquidity management, treasury technology and commercial cards. He has spoken at both regional and national industry conferences including NACHA Payments and the Windy City Summit and has published numerous articles in industry publications. He is a certified treasury professional and has worked with a large number of corporations, financial institutions and technology vendors to better understand industry trends, identify market opportunities and evaluate potential go-to-market strategies for new products initiatives. Prior to joining Aite Group, Judson was a senior consultant with Treasury Strategies Inc. He received a B.A. in philosophy from Bethel College in St. Paul, Minn.

Moderator Judson Murchie, analyst, Aite Group, LLC: Good morning. Thank you to Treasury & Risk and to all of you who are here to hear the Alexander Hamilton Award winner for our new category this year, the Solution of the Year. I’m Judd Murchie. As Donna mentioned, I work with a company called Aite Group. For those of you who aren’t familiar with us, we are an industry research firm that really tries to cover the area between the financial services industry and the technology that is used by both  the banks’ internal systems and the end user. So what solutions are banks offering to the corporates? Before we begin, I just want to share a little bit about perspective. This is my first time actually being in a city when the World Series was taking place there. I am based out of Chicago and I actually wasn’t there when the White Sox were in the World Series, so for me it has been quite some time. Yesterday there was the big rally in Times Square. The news was talking. There is so much optimism and a positive kind of feeling everywhere around.

Well today, I turn on the morning news, and the anchors are all kind of sad. I walk into the conference this morning, and people had their heads down and were just a little disappointed because the Yankees lost last night. But from my perspective, as a Cubs fan, there are six more games left. You’re in the World Series. You’ve been in 40 of the 106 or so World Series and you’ve won 26 of them. The Cubs haven’t won since 1945, or we haven’t been to the World Series since 1945, and it has been over a hundred years since we’ve actually won.

So with that in mind and the idea of perspective, I’d like to talk a little bit about what gives perspective. Over the last year we’ve found that one of the things that does give perspective is information. Almost all of the sessions yesterday and today have really talked about ways that treasury has weathered the storm and almost everyone depended on information. That information had to be provided in a timely, accurate and usable manner. Last September 2008, when the gasps of treasury groups around the world were heard as Lehman Brothers collapsed, everyone knew the ripple effects would be huge.

It wasn’t like Bear Stearns. It wasn’t like Freddie or Fannie. It was much different because there wasn’t that government body to swoop in and help prop up the organization. In moments after that gasp, the treasury groups we’ve talked to received a phone call. It could have been from the CFO, or VP of finance or CEO. There’s a phone call saying, “What is our exposure? Where are our risks?”


Solution of the Year 2010 Transcript

Treasury groups had two very different responses at that moment. Some said, “Well, here’s our risk.” Others didn’t; they didn’t know. They said, “Well, we’ll get back to you.”  Later that week, when the money market funds froze, and the following week when Wachovia and National City went down, they received a similar call from their CFO and they again had to say either, “Here’s what our exposures are” or “We’ll get back to you.”

The key that made the difference between them was not so much what the exposure was or the size of it, although that was important. It was the ability to quickly access that information in a very usable format. Each of these providers up here today have a solution that helped provide information. We’ve talked about visibility. We’ve talked about transparency and exposure monitoring all week. With each of these, they approach it differently, but they provided corporates with an ability to quickly identify where their risks were on the cash side.

Visibility into global cash and liquidity position was more important than ever when the credit markets froze, to be able to determine what your amounts to borrow were. And so, with that in mind, and the importance of information that is usable, timely and accurate, I’d like to welcome our Bronze Award winner. And it’s Treasury Sciences, with Ravi Pande presenting.

Ravi has worked for over 20 years on products and projects in the banking and treasury industry. He is a managing director for Treasury Sciences. He is an alumni of the University of California, which is the organization whose case study he’ll be sharing with you today.

Ravi Pande, managing director, Treasury Sciences: Thanks, Judd. I also want to thank Treasury & Risk magazine. We’re definitely honored to be selected in the category of Solution of the Year. And I also want to thank the University of California for allowing us to share the case study that I’ll be talking about today.

We’re a fairly new vendor in the treasury product category, so one of the things that we looked at when we started building out this product two years ago was the functions that most enterprises need. This chart shows the price that you pay to build the functionality to get into the game. It includes payments, cash management, debt management, long-term forecasting, reporting and enterprise integration. What we wanted to do was look at the challenges corporations face when they’re deploying these types of applications. When we talked to corporations and  asked, “what are the challenges?”, even in the best of cases where most everything went right and there weren’t issues, the adoption time frames were many months. In many cases for extended enterprise, they were a few years.

What we wanted to be able to do was put together a methodology in a product that allowed people to rapidly begin utilizing the product, provide feedback, and be able to configure best practices in the product. In order to do that, we needed to be able to make the product very configurable. We make a big distinction between configurability and customization. We want to allow people to begin using the product, and then as they learn about changing processes, we want them to learn about what works within their organization and be able to quickly configure that and not necessarily have us configure it. We want them to be able to configure it from an administrative perspective.The other item that we talked about with customers was really that the return on investment wouldn’t come until enterprise integration was enabled. A lot of soft benefits were there for the treasury department in terms of compliance and other factors of moving to a system. But in terms of actually looking at real-time enterprise visibility, until they were able to integrate information from other systems and even from their extended enterprise, they weren’t able to actually provide an ROI that made sense for the organization for a fairly substantial investment. Not just in time and cost, but in internal resources.

And then we wanted to be able to support bank independence. As customers either changed banking relationships or added new banking relationships, we wanted to support bank independent formats, such as the ISO 20022 format. In terms of actually adopting the product within the organization, we wanted to be able to support rapid end user adoption. In addition to the product being Web-based, we wanted to make it very easy for organizations to adopt it across a wide user base.


Solution of the Year 2010 Transcript

So as we were developing this product, our product team was fortunate to get a customer that had all of these needs, and that customer was the University of California.

Most people are familiar with the University of California. I’ll talk about some of their enterprise challenges. But basically, they have an $18 billion annual budget. They manage, in house, both an $8 billion short-term investment pool to fund their daily operations as well as a longer term $75 billion pool, which is their pensions, grants and longer term annuities.

It’s very capital intensive. There’s a lot of building projects that are funded by debt programs. Their typical daily cash flows are between $100 million to $500 million a day. In addition to the 10 campuses, they have five medical centers, eight hospitals, and then they’re affiliated with various national labs, campus foundations and alumni organizations.

In terms of user base, they have in excess of 200 users including traders, who in real time are able to see both the position for the day and the forecasts that are coming for the next week and the next month so they can help ladder their investment portfolios.

So, I’ll talk a little bit about some of the challenges that UC has faced in terms of an enterprise deployment. One of them was, in essence, they are a decentralized organization but they have centralized cash management and investments. All of their campuses and medical centers had to use the banking products that the centralized treasury mandated in terms of ACH products, cash disbursement products and cash pick-up services.

So, across all of their organizations and business units they did have a common set of banking products, but across those organizations each organization could decide on their own which general ledger (GL) system they’re using, which accounts payable system they’re using, which accounts receivable systems they’re using, which AP system they’re using. One of the issues was how to provide straight-through processing with, in addition to the enterprise GL, 15 other distinct GL systems.

Then the other issue that they had was the accuracy and timeliness of forecast information -- how to get all of this information that’s flowing throughout their enterprise in terms of payrolls that are going out every week, in terms of account payable information that’s going out, as well as incoming fund forecast. That included things like grants that are coming in and donations that are coming in, and how to be able to easily forecast that information.

Those are two of the areas that I’ll talk a little bit about. One of the things that we did in looking at the GL system, and yesterday Crista Binder at City of Los Angeles Treasury also mentioned this, was to do formatting based upon BAI file codes to be able to map into GL systems. We took a similar approach, but what we also did is allow the front-end applications for payments and forecasting to be able to be dynamically represented. In this case, what we had was the ability on an organizational basis to define the specific fields that are associated with each subsidiary so that when users logged in from a specific organization, they were able to see the accounting treatment and associate those with payments and forecasts so that we could associate straight-through processing.

In this example, we show a pop-up that comes up when they’re putting in a payment in the enterprise GL. Or they may have GL number, fund number and customer reference number, whereas if somebody is coming in from UC Berkley and they’re on an Oracle system, they may see an accounting treatment field that’s account number and a sub-ledger field that could be totally different.

This is another case of where all of this administration and configuration can be done by the in-customer through administrative screens and not have to be something that we have to come in and either configure or customize.


Solution of the Year 2010 Transcript

The other area with respect to cash forecasting, I mentioned that we deployed out to all of the various business units, so they now had the ability to put in cash forecasts automatically. What used to come in manually via e-mails, they can now go into the system and manually forecast both outgoing and incoming cash flows.

That was definitely an improvement, but within their enterprise they still had each of the organizations’ AP systems and payroll systems talking directly to the bank. We looked at this problem and said from a process point of view, what we want is people in accounts payable and payroll to come in and say, “I’m sending through a $50 million payroll file on the 15th,” or “I’m sending through a $30 million accounts payable file on the 30th,” so that the traders can go in and look at the forecast and be able to see what types of flows are coming in the future.

But it was still a human issue. You still had to have that discipline across 16 different organizations, and if you multiply that by two or three people and multiply that by 40 or 50 files that are being passed with bulk ACH every month, then if you miss one file, that’s $30 million or $50 million on a particular day. It’s a fairly significant amount of money that might be underfunded.

So we looked at that issue and we said, “Well, everyone at least is going to the same bank because they’ve mandated that they can only use one ACH provider on the bank.” So we talked to the bank and we said, “Instead of having people manually forecast what they submit to the bank that’s going directly from their AP and payroll systems, as soon as you receive that file, can you echo back to us what was in that file and what those totals were so that we can forecast that systematically?”

As soon as the bank got the bulk ACH file, it enabled us to bring that total in as a forecast, forecast it, and provide enterprise visibility into both the cash management team as well as all the investment professionals who are looking at those totals to determine how to ladder their short-term portfolio.

The other thing that it did is that at that point the bank had accepted the file and had validated it, so there wasn’t any issue of what the exact amount was going to be on that file. Whereas before, they were manually forecasting what they thought they would submit to the bank, and if there was any issue with the file or if some of the totals were incorrect, those figures would obviously be different. So that was a big improvement in terms of providing enterprise visibility to cash forecast across the entire enterprise.

The last area that I’ll speak to is end-user adoption. One of the things that we tried to do was make the product very easy to use. When they were deploying the product, we did not do any end-user training ourselves; we provided all the training via training videos that users could look at. And in terms of UC deploying it out to various organizations, they were able to deploy it all via Web sessions. They would bring in a specific organization and campus and provide a Web session. For users that weren’t able to attend the Web session and go through it, the videos were there for them to be able to use.

It eliminated the cost of going out to various organizations to train users, and it really reduced the system’s adoption costs significantly. That was one of the big benefits in terms of having the ability of rolling it out into multiple organizations in a very wide roll-out, especially when there were different applications. You had payment users using the payment system, you had reporting users using reporting and doing reconciliation and statements, you had investment users looking at cash forecasts and real-time trading indicators, and then you had cash management users. There are very distinct groups of users that are using different parts of the system.

We’re very thankful that we were able to use the University of California’s experience during this process to prove the hypothesis that we had when we initially developed the product, which was that when you’re doing large enterprise systems, what you want to try to do is adopt a product where you can configure rather than customize the product because you want to have the ability to incorporate your learning processes during the adoption process.

In order to do that, you have to have a product that doesn’t require customization, a whole round of testing and a whole other round of acceptance testing. We were able to deploy international standards, so they’re doing all of their payments including about 70 centers abroad. They have about 50 offices and research centers abroad, so they do a fair amount of international payments using the ISO 20022 standard. They were able to roll out to various organizations in very short time frames, and then roll out modules incrementally to various organizations as well. Thank you very much.


Solution of the Year 2010 Transcript

Moderator Judson Murchie: Thank you, Ravi. Now I’d like to welcome our Silver Award winner for the Solution of the Year, and that is Aon Risk Services’ broking excellence worldwide. Let me introduce Peggy Stewart. She is the executive vice president and chief operating officer of Aon broking excellence worldwide. It’s a core area focused within Aon Risk Services, which is a business unit for the larger Aon Corp. Peggy Stewart’s global responsibilities include the development and execution of policies, strategic plans, operations, processes and objectives for the firm with an eye toward focused innovation that differentiates Aon and its ability to help clients find the best solutions to run their business. Please welcome Peggy Stewart.

Peggy Stewart, executive vice president and chief operating officer for broking excellence worldwide, Aon Risk Services, Aon Corp.: Good morning. We’re very excited to be here. We want to thank Treasury & Risk magazine for the recognition. One of the things that we’re most excited about this product is that it truly brings a value to our clients and our colleagues. I want to start off by telling you a little bit about Aon, for those of you that don’t know much about it. We’re the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. What is valuable about this system that we have created, the global risk inside platform, is that this truly is a global system. As you can see, we have 37,000 colleagues around the world. There are 500 offices in more than 120 countries.

By the end of the first quarter of next year, we expect that all of our colleagues within the retail division will be utilizing this platform. Currently, we have rolled this out in the first quarter of 2009 and we have 7,000 colleagues using this system in 17 countries.

One of the things that we pride ourselves on is delivering distinctive client value. So how do we do that, right? The way we do that is that we measure it in terms of whether income improves with the solutions that we’ve brought to the table for you. Does it enable your balance sheet to get stronger? And has it reduced the volatility that you may be exposed to? Those are all significant things to you as treasurers and as CFOs.

We went out and said, “Let’s look at a survey of what the top 10 risks are for all of you. And as you can see, that ranges from the economic slowdown to the failure to attract or retain top talent. But the significant things are the bullet points below, where we looked at the data and how often you may use the data to identify some of your exposures, and we looked at how to help you to validate that and then figure out some solutions to those exposures.

In many cases, 35% of the respondents don’t use data as their primary means of assessing risk. Less than half of the respondents said they’re tracking and managing all the components of their total cost of insurable risks, which tells you what’s happening with the other half that were surveyed.

Realizing that we have a distinct advantage point, because we’re collecting data from all of our clients and we’re collecting data from the carriers, we decided to change that data into information to help you make some better decisions when you’re purchasing insurance, when you’re preparing your risk management strategy.

That’s where the creation of the Global Risk Insight Platform came from. It was a cross-collaboration with our IT group, our business and our corporate strategy group that evolved into a center of innovation and analytics in Dublin, Ireland, and they now house the Global Risk Insight Platform, which we call GRIP.

What they do is continually scrub the data that is being entered into the system, and then they have a number of statisticians and actuaries that are taking all of that data and giving you the information that you need with what’s going on in the current marketplace.


Solution of the Year 2010 Transcript

And another value that this brings to the table is that it is in real time. So at any given point in time, we can understand what’s happening in the marketplace. With the financial environment that we were just in and currently are in, when you had situations with AIG or with Fortis and a number of other carriers, at the push of a button we can now see where all of our excess and primary placements are so that we can quickly respond to you with options if you have any placements with any of those particular carriers.

It gives you insight into current and future pricing. Right now, no other brokers can provide that information to you, so we’re capturing all of the quote information as it comes in. We can start to do predictive pricing models so we can start to tell you: 1) How to better budget; and 2) What the evolution of some of that pricing is as we move forward closer to what your potential renewal dates are.

The beauty of this system is that it’s a proprietary system. We developed it internally. So we’re not encumbered by any licensing restrictions. We’re able to provide this to all of our colleagues. As I said, by the end of this year everybody should have this on their dashboard. So the 17 countries that are currently live, when your broker or account executive comes to meet with you, they will have their laptop computer and they will actually be able to access this system from their computer and show you the information in real time.

Now, depending upon the country that you’re in, what we’ve also done is customize this, so if you’re in France the screens will be in French. The currency will be in euros. The products are all French products. If you’re in the U.S., it’s in English. And what happens is, if you want to look at global information, we’ve put together a master data warehouse behind the scenes that will then map all of the various products and carriers so that they will be in the language that you want to see and the currency you want to see.

Our mantra is helping colleagues help clients capture the value. These are some of the features of the system: You’ll get fact-based market intelligence. You’ll understand better the capacity of the carriers. You’ll understand the carrier’s appetite. We can bring to you real-time product solutions. In many cases, you’re working with data in the past. It could be 30 to 60 days old, and by the time you’ve talked to your brokers about creating a product and they come up with a product with the carrier and they bring it to your attention, it may be passé.

Within minutes, we will now be able to identify where the gaps are in the marketplace that we can fill by creating products to bring to your attention. This is what the dashboard looks like. It’s actually a touch screen. You can go in and slice and dice the information on a local/global/international basis. So if you’re based in the U.S. and you’re making an acquisition in Singapore and you want to understand the state of the marketplace in Singapore, we can now give you that information in real time.

We’ll be able to give you the average price per million. We’ll be able to tell you what the forecast and the current trends are. We’ll be able to tell you which carriers have appetites for which deductibles and which retentions. If you choose to change your deductible or your limit, you can now at the push of a button look and say, “Who are the carriers that now have an appetite if I start to change the parameters of my program?”

So in essence, that’s it. It is being rolled out to our clients in the next several months. As I said, by the end of the first quarter of next year we will have all of our colleagues around the world utilizing this system. Thank you.

Moderator Judson Murchie: Thank you, Peggy. That leaves the Gold Award to Reval, which has acquired FXpress. It will be presented to Stephanie Swanton, who is a product manager at Reval with tremendous experience in the financial marketplace in product management for derivative instruments, trade processing and work flow, financial risk management and collateral management.

At FXpress, Ms. Swanton was the product manager of the investment and debt module. Prior to joining FXpress, she helped key software development positions for 16 years as product manager for Northbound Solutions. She was formerly a senior consultant for collateral management with Algorithmics, a product manager of interest rate products with FX Ltd., and vice president and product manager with SunGard Trading and Risk. Please welcome Stephanie Swanton.


Solution of the Year 2010 Transcript

Stephanie Swanton, product manager, Reval: Thanks, Judd, for the introduction, and thanks to Treasury & Risk for the honor in being able to participate in this event. I give thanks to all of my friends at Wm. Wrigley Jr. Co. for the case study.

This has been an incredible year. We had a very high ambition of what we wanted to accomplish, and it was just a matter of what time frame we were going to set this out in. We had a lot of our clients hoping that we can provide them with a really good lending module. Before I move into how we did this or what we did, I want to give thanks to some of the key players that made this happen.

We wanted to accomplish a two-year project in a year or less. And in order to do that, my boss, Darren Greway, out in the audience here, had to say, “Well, we’re not going to be able to do what you want to have done within that time frame with the current processes that we have in place.” So I really have to say that it’s a huge thanks to Darren for taking a look at how we currently work and how we produce the software and how we get work done and saying, “We can do this if we make a few changes.”

He really harnessed all that in putting together a development procedure that would allow us to really move this product forward, get it done, and in a way that allowed us to get a lot of feedback from our clients along the way and not stop us in our tracks for doing that. Thank you, Darin.

And thanks to three key players, one who is in the audience today, Rhonda Kinard, Eric Newberg, and Mike McKovich, They really dedicate a lot of time and energy, and they embraced the new procedures that we put in place. They had a lot of patience with me and some new ideas and trying to think outside of the box of how to proceed with this solution that we came up with for our client base.

The main purpose of the lending module is to track your intercompany loan obligations and your external bank loan obligations. Sounds easy enough, right? We already had loan obligations being tracked in the application, but they weren’t very flexible and you really had to understand how the system worked in order to properly process those loans.

People wanted more control over that. They wanted to be able to control their loan obligations in the way they were actually being processed, not the way the terms and conditions of the loan were being processed. I like to think of it as, you lend to your family member and you put together how much they’re going to pay you every month, and then, it’s another thing when it comes around. That’s what they were looking for. They needed to be able to hedge these loans. They had global operations in place and they’re lending in multiple currencies, and they wanted a process in place to not only just track the loan themselves, but to be able to hedge them and report on them.

The biggest thing and the most important thing, particularly for Wrigley in this case, was to not only just take a look at it from the perspective of the borrower and what effect it has for their intercompany lending, but they really wanted to take a look at all of their general ledger from all of their perspectives. Instead of submitting to their affiliates with all the general ledger postings, where they had to do the conversion to their own functional currency, they wanted this system to produce the dual entry for both the lender and the borrower. This involved changing the unique terms and conditions throughout the life. If the interest conditions are changing it’s no longer a fixed-rate loan, we’re going to start basing this on a float. Or, it’s a float loan and I want to change the index I’m basing it on, or a spread, or whatever the case might be. They wanted the ability to do that without having to track it in another contract. A lot of applications out there will ask you to unwind a contract and set up a new one, roll this one, close this one, add a new one. They want to do everything in one play and they want it to be supported for multi-currency. They want facilities to be set up and to have the ability to place loan obligations against those facilities with multi-currency entities and with loan obligations and multiple currencies.


Solution of the Year 2010 Transcript

A little bit about Reval.Reval is a global leader in derivative risk management. They’re a privately held company, founded in 1999 and acquired by FXpress in August 2009. Reval supports over 350 corporations worldwide and has over 170 employees. And Wrigley, obviously everybody knows Wrigley, right? Wrigley Spearmint Gum. I know I chewed tons of it as a child. They operate in more than 40 countries and their candy and everything else is in over 180 countries. They operate as a subsidiary to Mars and, or course, they have a decent size revenue, $30 billion.

I’m going to focus on Wrigley, although we did work with existing clients and also additional prospects that later on engaged us for this particular module. But Wrigley’s particular business needs are why we’re here winning the Solution of the Year.

Wrigley really needed to manage their debt in a way that allowed them to get away from their spreadsheets, where all these formulas were prone to errors and it was very difficult to manage. If you get over 50 to 100 loan obligations and a lot of them are based on floating rate debt and you’re managing these loans either centrally or decentralized and you’re trying to reconcile with all your affiliates, this is a huge nightmare for organizations.

They needed to track both their external debt, which everybody tends to focus on when they’re looking for their applications, but they wanted their intercompany lending book here as well. They wanted to view that activity from both parties’ perspective so if their affiliates come on to their system, the affiliates can see exactly where they are. They wanted reports from their perspective in their own functional currency in the same way as any of the lenders. And of course, if you are acting as both the lender to some obligations and the borrower in other cases, you want to see your net position. You don’t want to have to get two separate reports and try to figure it out yourself.

Wrigley really wanted to streamline this process to make it a lot easier. They didn’t want to have to track things in spreadsheets anymore. One of the key things that they wanted was to be able to support irregular rate reset. It sounds kind of simple to support Fed and prime reset rates, but the reason I say that is because it’s not a daily rate, it’s not a weekly rate. We don’t know when the rates are going to change. And they didn’t really like some other applications that they were looking at, at the time, where they would have been forced to be setting them up as a daily reset rate and entering the rates every day until they changed.

So this was key for them as to what they wanted. And why did they want this? Obviously, they were dealing with a lot of manual processes, entering some data in spreadsheets, some in other internal systems, some in documentation. It lacked the workflow between their corporate office and their affiliates.It was inconsistent. Everybody was doing their own thing. You get a reconcile, you find out you have differences, it’s taking up time. It’s taking up resources. There’s operational risk here.

So what we did in the application is, we provided the ability for them to be able to pay, defer, or capitalize interest whenever. They didn’t have to pre-set this up. We would always calculate the accrued interest payable amount, and of course we’re calculating withholding tax for their local jurisdictions on that. If they wanted to sometimes pay or sometimes to defer, we had all this in the workflow so that they can say, “Well, with this particular loan obligation we’re typically dealing with this affiliate in this manner, so we’re going to default your workflow and assume certain characteristics.”

They also had the ability to adjust their historical interest. The biggest frustration with any application is when somebody has made a mistake. The market data came in incorrectly because somebody manually entered it incorrectly. We now have bad calculations out there and we’ve made payments based on the bad calculations. We want to adjust it without having to redo the contract, which a lot of applications require.

So we provide that ability. You can actually change historical calculations of the underlying calculation so you can still recognize what actually happened and what payments transpired, but we’ll do a “catch up” as to your overpayment or underpayment and what you have to do now.

Again, we did provide the dual-view perspectives, a very interesting challenge. And thanks again to Darren for doing it outside of the box of how we would normally do dual-views in most applications. Instead of doing mirror imaging of contracts, it’s just one contract, and we can post both sides of that contract without you having to track it as two separate contracts. And we allow hedging from either the lender or borrower’s perspective, not just this trading entity counterparty perspective. So that was accomplished. This system was approached from a perspective that whether you’re a centralized corporate treasury or decentralized, the loans are easy to enter and monitor and control.


Solution of the Year 2010 Transcript

We have a centralized screen to make mass modifications across all contracts, with specific interest rate conditions in supporting how that interest is calculated, or how fees are calculated. You can specify a particular term and condition that applies to 20 of your contracts and say, “Look, I want to just modify or update those 20.” Obviously, you can still go into a single loan obligation and make a single modification, but this is a huge deal for our clients. Our clients like this particular dashboard. It tells them if they’re missing rates. It tells them if something went through. It tells them if they have a problem.

From a technical perspective, this is a browser-based Web interface, so that globally all affiliates have access to reports and to entering any data that they might have to enter. We’re doing batch processing across all of these loans, and we separated accruals from payments.

Now people say, “Well, of course they’re separate.” But most technical applications I’ve seen tie the accrual calculation cash flows to the physical payment. So it’s very difficult to really do what you need to do with these loans, or maybe even with other types of contract structures. You know, you don’t have that flexibility, everything’s tied together, and you can’t divorce the two to really reflect the real world.

So we did that, and one of the ways that we did that is by putting a sophisticated accrual engine together. Once you have market data available, this system will know what’s available, so you don’t have to set up and say, “Oh, this is a daily rate, this is a weekly rate, this is a monthly rate.” When you have a rate, we’ll apply it. And that will be done automatically. That was big. That was a lot of work, and it caused a lot of work as well for our Q/A department to make sure that was working properly, especially when they had to have historical adjustments to those types of rates.

The other approach we did is, we said, “Well, what’s happening here with these loan obligations from a technical and functional perspective?” It’s just one basic contract type, but there are variations from an external contract versus an intercompany contract from your bank and from an intercompany contract, or from something that belongs to a line of credit facility versus a straight-out loan. So what we did is, we stepped back and instead of creating these separate contracts that you might think of, “I do this, then I do that,” we said, “It’s just one thing.”

Performance-wise, it’s difficult when you’re dealing with a single contract now or a single loan obligation where for the next 10 years you can track everything in one place and see all your activity in that one screen. You could have daily drawdowns every day; you can have thousands of cash flows. And when a user clicks on a screen and you’re trying to pull up all this data, it’s time-consuming. So we had to do a lot of work technically to cash some balances and stuff for performance purposes.

We started this in the summer of last year, so within a short period of time Wrigley is using this. What it has offered Wrigley is dual postings to general ledger. They now have functional currency postings for all their affiliates as well as corporate. They now have consistent and accurate data. They’re using a single application. All the data is in one place, all the calculations are known, and they’re setting up their terms and conditions once. They’re applying that across multiple contracts. They don’t have to go into each obligation and type the same information over and over again, which in itself can be a data risk whether it’s in an application or spreadsheet alone.

The other key thing that they now can do is track at the time they make an interest or fee payment or drawdown or whatever they’re doing. They couldn’t enter an exchange rate. They were looking at all their other competitors, and I said, “Of course you can do that. You need to do that.”


Solution of the Year 2010 Transcript

So that’s something that we have in the application, and that provides much more accurate calculations for them rather than just tracking the currency for loan obligation itself and at the end of the month applying a single rate.

Obviously, they have global access now. They don’t have to share things via spreadsheets to their affiliates. They have a single system. Their affiliates have all their confirmations, all the reports, and they have custom queries.

Their affiliates can go in and say, “Oh, this is what I have to look at every day or every week.” They can indeed calculate their interest terms as they need. They can configure anything within the system without having to rely on their IT department, which is also resource constraint.

We have a great reputation for client support. They just call us when they need to figure out how to enter something or how to do something. The flexibility within the contracts themselves really lends the ability to customize and create the contract they need rather than coming back to us and saying, “I now need this new contract type for this loan to act in this capacity.” We’ve actually developed it in a manner that hopefully will meet most parties’ needs. And we hope that all of our clients have contributed to this in a manner that will certainly make that the case.

Wrigley’s target for success when they set out for this was to have an efficient workflow that has consistent loan calculations throughout for all of their affiliates as well as their own corporate. They want to save time, money and resources. They don’t want to have to spend days on end doing their end-of-month procedures. They want to spend more time analyzing what this system is producing for them.

We’re really happy to be working with Wrigley. We have a very strong relationship with them as we do with a number of our other clients. And we’re hoping to continue that and to continue to improve and expand this to other people. Many of our other clients have recently taken this version of the module, and they’re converting very easily. We have smoothed the transition and take that into consideration when developing it. So they’re now embracing the new contracts. They’re much easier to process than the old loan obligations. Thank you very much.

Questions and Answers:

Moderator Judson Murchie: Can we give another round of applause for all three of the solution winners. I think we have time for about one or two questions.

Q: This question is for Stephanie. Does your solution assist in monitoring loan covenants? I might have missed that in the presentation.

Stephanie Swanton, Reval: Are you talking about sub-limits to those loan covenants or the individual loans themselves? Would we have loan facilities? You can set up your facilities, establish your available line of credit, and attach any documentation. so if you havePDF files or Word documents, you can attach them within the application, and we’ll store that for you for reference. Any sub-limits, if you have a bunch of affiliates or subsidiaries with individual sub-limits against the overall credit facility limit, you can set those up. We give you the usage of that. We also calculate any utilization fees if you want to calculate based on the used amount of the line on the total overall limit -- the outstanding balance usage and percentage overall, flat fees, any type of fees that you might accommodate with those. If you have specifics I’d be more than welcome to chat with you.

Q: This question is also for Stephanie. I’m curious to know what the development costs were that Wrigley took for Reval to do the development effort.


Solution of the Year 2010 Transcript

Stephanie Swanton, Reval: It didn’t fund the effort for us insomuch that at the time we were embracing them in this process. We were already halfway there. We had already had this as a strategic development effort. So it was not client funded. Essentially, when we were halfway through the project, or maybe a little bit more than half, they had conversations with us. They weren’t actual clients at that point. They liked what they heard and they knew what we were doing, and they just purchased the product like a regular client would, knowing what we had finished so far and what was on the plate to be finished. We just worked hand in hand to make sure for them that everything was going to work out to their satisfaction. So it worked out for both of us.